Myths and Frequently Asked Questions
Life Insurance as Part of Your Estate Plan

Myth 1: Life insurance is too expensive for most people.

Term life insurance is often more affordable than people expect, particularly for young, healthy applicants. Because it is designed to cover a specific period (not your entire life), the monthly cost is usually much lower than permanent life insurance. Rates are also largely based on risk. Insurers look at your age, health, and other factors. Generally, the younger and healthier you are when you apply, the lower your premium, and you can often lock in that price for the length of the term. Even a modest term policy can cover things people worry about most, such as final expenses or loans.

Myth 2: Life insurance is useful only after you pass away.

Some types of life insurance, such as whole life or universal life insurance, can build cash value that you may be able to access during your lifetime. Part of your premium can go into a cash-value account. Over time, that cash value may grow (the exact growth depends on the type of policy), and you can often access it through a policy loan or withdrawal. However, accessing cash value can come with trade-offs. For example, loans may charge interest or reduce the overall death benefit.

Myth 3: Employer-provided life insurance is sufficient.

Employer-provided group life insurance is a helpful benefit, but coverage amounts are often limited. Most workplace plans provide a flat amount or a salary-based amount, which may not be enough to cover larger needs such as replacing income for dependents, paying off a mortgage, or funding long-term support for a child. The employer also controls the insurer and the plan design. If you change jobs, coverage may not follow. Some plans allow you to convert to an individual policy, but conversion can be more expensive and may come with deadlines or limited options. A personal life insurance policy can help fill those gaps.

Myth 4: Stay-at-home spouses do not need life insurance coverage because they do not earn income.

A stay-at-home spouse may not earn a paycheck, but the services they provide can be costly to replace. If a stay-at-home spouse dies, the surviving spouse may suddenly need to pay for childcare, household management, transportation, and care coordination. They may also need to cut their work hours or take unpaid leave to cover such responsibilities, further reducing household income. Life insurance can provide breathing room during this period by helping pay for replacement care and services while the family adjusts and by keeping children's routines stable during a difficult transition.

Frequently Asked Questions

Question 1: Do I need a life insurance policy if I am single?

Life insurance can still provide substantial benefits to single individuals. As a single person, you may need life insurance if

●       someone relies on you for financial support, such as an aging parent, a sibling with special needs, or a child, even if you are not married to the other parent;

●       you have co-signed a debt or share a financial obligation, such as a car loan or mortgage, with someone;

●       you want to cover funeral and related expenses without burdening your loved ones;

●       you own a home or other property and want to leave money for taxes, upkeep, or immediate bills; or

●       you own a business.

If no one depends on you financially and your debts would not fall on anyone else, you may be less likely to need life insurance.

Question 2: Can I name a minor child as the beneficiary of my life insurance policy?

Life insurance companies generally will not pay a large death benefit to a child under the age of majority (typically 18 or 21, depending on the state). If a child is named, a court-supervised guardianship or conservatorship will likely be required to administer the funds until the child reaches the age of majority. This outcome can incur significant court costs and attorney fees due to the required court oversight. Instead of naming a child outright, many families do one of the following:

●       Name an adult you trust as the beneficiary with a clear understanding of your intentions for the child. When the insurer pays the death benefit, the funds legally belong outright to that adult beneficiary. There is no legal obligation for them to use the money for your child. While you can communicate your wishes, this arrangement offers no enforceable protection. In addition, the funds could be subject to the adult beneficiary's creditors, lawsuits, or divorcing spouse.

●       Use a trust as the beneficiary. A trust is a legal arrangement in which you authorize a person you choose, the trustee, to hold and manage assets on behalf of a beneficiary. You can establish specific terms governing how the funds are used and when the child gains access to them. The trustee is legally bound to manage the assets in accordance with those terms.

●       Name a custodian under your state's Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) law. Both UTMA and UGMA are state laws that allow an adult (a custodian) to hold and manage money or property for a minor until the child reaches the age of majority, which is set by the state of residence.

●       Use the policy's minor beneficiary or guardian designation form if your insurer offers it. Some insurers allow you to name a responsible adult to receive and manage the funds on behalf of the child without requiring a full court process. However, the rules governing this option vary by insurer and state.